India’s economy has showcased remarkable resilience and growth amidst global challenges, with GDP estimates revised upwards to 7.6% for the fiscal year, according to Ajay Seth, India’s Economic Affairs Secretary.

Speaking at a World Bank committee meeting, Seth highlighted India’s consistent performance, with growth exceeding 8% for three consecutive quarters of FY24. Seth emphasized that India’s proactive reforms and investments in sustainable growth avenues have positioned it as a standout performer amid sluggish global growth trends. Various agencies have revised India’s fiscal 24 growth estimate closer to 8%, reflecting confidence in the country’s economic trajectory.

Despite Finance Minister Nirmala Sitharaman’s absence from the annual Spring Meeting of the IMF and the World Bank due to ongoing elections, India’s official representation at the meeting underscores its commitment to global financial cooperation.

Seth noted India’s continued focus on capital expenditure, which has spurred private investment and led to enhanced Gross Fixed Capital Formation (GFCF) growth of over 10% in FY24. He also highlighted positive trends in inflation outlook and external trade balance, indicating favorable economic conditions.

In a significant move to catalyze AI innovation, the Indian government has approved the India AI Mission with a budget outlay of INR 103 billion. This initiative aims to build a robust AI ecosystem through infrastructure development, indigenous capabilities, talent attraction, and startup financing, positioning India as a leader in technological innovation.

Seth also highlighted the manufacturing sector’s double-digit growth in Q3 of fiscal year 24, driven by increased investment, improved investor confidence, and strong domestic demand. He underscored India’s dominance in digital transactions, with a share of 46% of global real-time transactions in 2022, reflecting the country’s digital transformation and inclusive economic growth.

The volume of UPI online transactions witnessed a significant YoY growth in Q3 FY24, driven by convenience, security, and increased financial flexibility. Seth emphasized the transformative impact of mobile connectivity and digital banking on inclusive growth, benefiting consumers, traders, vendors, and vulnerable populations.

India’s vibrant capital market, supported by a robust investment climate and transparent trading system, has remained among the best performing in emerging markets. Seth highlighted the surge in dematerialization (DEMAT) accounts, reflecting investor confidence and technological advancements in the equity market.

Overall, Seth’s remarks underscore India’s economic resilience, proactive reforms, and commitment to leveraging technology for inclusive growth and global competitiveness. The country’s sustained growth trajectory and favorable economic indicators position it as a key player in the global economic landscape.

Seth’s address to the Development Committee highlights India’s steadfast commitment to economic growth and technological advancement. With a positive outlook on inflation, trade balance, and capital market performance, India continues to attract investor confidence and drive sustainable development. The India AI Mission underscores the government’s vision to harness emerging technologies for inclusive growth and global leadership. As the nation navigates through global uncertainties, its resilient economy and strategic initiatives pave the way for a brighter future. India’s role as a beacon of growth and innovation in the global arena remains steadfast, promising continued prosperity and progress.

According to the report, the World Bank asked the Pakistani government to create a national policy for child development and called for reducing subsidies on energy.

According to a news report, the World Bank has urged the Pakistani government to undertake significant tax reforms, including the removal of exemptions on duties and sales tax. The report emphasizes the pressing need for these reforms to spur economic and social progress in Pakistan. The World Bank’s report highlights several key recommendations for the Pakistani government. Firstly, it calls for the establishment of a national policy for child development.

Additionally, it advocates for reducing subsidies on energy and other commodities, with a suggestion to reallocate these funds towards public welfare initiatives. Furthermore, the report advises the government to implement austerity measures and foster public-private partnerships in government-owned companies to enhance efficiency and productivity. A central focus of the World Bank’s recommendations is the restructuring of the tax system. Specifically, it suggests the elimination of exemptions on duty and sales tax, along with the introduction of new taxes on the real estate and agriculture sectors.

Additionally, the report advocates for the creation of a long-term commercial tariff plan and the alignment of gas tariffs for consumers with the cost of supply. Highlighting a concerning shortfall in tax collection, the World Bank’s report underscores that Pakistan is currently collecting less tax than its potential capacity. The shortfall is estimated to be approximately PKR 737 billion. To address this issue, the World Bank urges Islamabad to eliminate all tax exemptions to alleviate the burden of debts.

Moreover, the international lender recommends increasing tax revenues from agriculture, properties, and retail businesses to generate additional income. It identifies real estate and agriculture as key sectors with substantial untaxed wealth and encourages provincial governments to impose taxes on these sectors.

Overall, the World Bank’s report underscores the critical importance of comprehensive tax reforms and strategic fiscal policies to foster sustainable economic growth and social development in Pakistan.

The MPC underlined the strong momentum in the domestic economy, the GDP expansion at 7.6 per cent in 2023-24 on the back of buoyant domestic demand, strong investment activity and a lower drag from net external demand.

The bright growth prospects of the Indian economy in 2024-25 supported by strengthening rural demand, rising consumer confidence, optimism on employment and income, strong prospects of the manufacturing and services sectors are among the factors cited by Reserve Bank of India Governor in pushing for a vote to keep the policy repo rate unchanged at 6.50 per cent.

“The strong growth momentum, together with our GDP projections for 2024-25, give us the policy space to unwaveringly focus on price stability. Price stability is our mandated goal and it sets strong foundations for a period of high growth,“ said Das, emphasizing on continuity with withdrawal of accommodation, at the 48th meeting of the Monetary Policy Committee of the RBI (April 3-5), 2024, the minutes of which were released on Friday.

The meeting also saw members Shashanka Bhide, Ashima Goyal, Rajiv Ranjan, Michael Debabrata Patra and Shaktikanta Das voting on status quo. The MPC underlined the strong momentum in the domestic economy, the GDP expansion at 7.6 per cent in 2023-24 on the back of buoyant domestic demand, strong investment activity and a lower drag from net external demand.

According to Das, upbeat business outlook of firms, healthy corporate and bank balance sheets, upturn in private capex cycle with capacity utilization ruling above the long period average can be expected to give further boost to domestic investment activity. Das was positive that improving global growth and international trade prospects may provide thrust to external demand. With the Indian economy is growing at a robust pace of an average annual rate of 8 per cent, the last three years has seen India continuing to be the fastest growing major economy in the world, supported by an upturn in investment cycle and revival in manufacturing. Services sector continues to grow at a strong pace, Das noted.

The RBI Governor also expressed satisfaction over the CPI headline inflation during January-February 2024 which has stayed at 5.1 per cent in each of the months, and moderated from the elevated level seen in December 2023 when it was 5.7 per cent. While the persistent and broad-based softening in CPI core inflation (CPI excluding food and fuel inflation) by 180 bps since June 2023 is driving the disinflation process, Das expressed concern that volatile and elevated food inflation is disrupting its pace. Going ahead, while the baseline projections show inflation moderating to 4.5 per cent in 2024-25 from 5.4 per cent in 2023-24 and 6.7 per cent in 2022-23.

Das advised caution against getting distracted — by the success in the disinflation process — from the vulnerability of the inflation trajectory to the frequent incidences of supply side shocks, especially to food inflation due to adverse weather events and other factors. Das also flagged overlapping food price shocks, which apart from imparting volatility to headline inflation, may also result in spillovers to core inflation.

“Lingering geo-political tensions and their impact on commodity prices and supply chains are also adding to uncertainties in the inflation trajectory,” observed Das, suggesting that these considerations should dictate the need for the monetary policy actions to tread the last mile of disinflation with extreme care. Besides, market expectations are also closely aligned with that of the MPC, monetary policy transmission is continuing and inflation expectations of households are also getting further anchored, Das pointed out.

At this stage, Das pointed out, the gains in disinflation achieved over last two years have to be preserved and taken forward towards aligning the headline inflation to the 4 per cent target on a durable basis. The RBI Governor and other members of the MPC were unanimous in the view that the global economy exhibiting resilience is likely to maintain its steady growth in 2024.

Inflation is treading down, supported by favorable base effects though stubborn services prices are keeping it elevated relative to targets and as the central banks navigate the last mile of disinflation, financial markets are responding to changing perceptions on the timing and pace of monetary policy trajectories, the MPC agreed.

India was one of the ‘large economies — apart from China, Indonesia, the Russian Federation, the United States, among others – which escaped the financial trouble that loomed earlier in the year 2023 – thus emerging as a stakeholder in the world economic growth of 2.7 per cent, just 0.2 percentage point more than the threshold of 2.5 per cent that is often associated with a global recessionary phase. This also happened as the risks that threatened to substantially slow down global economic growth in 2023 remained subdued, and as a result of which, the UN Trade and Development (UNCTAD) report update said on Wednesday.

The report warns of further growth deceleration in 2024, citing falling investments and subdued global trade dynamics which are expected to slow down global growth to 2.6 per cent in 2024, slightly slower than in 2023. This makes 2024 the third consecutive year in which the global economy will grow at a slower pace than before the pandemic, when the average rate for 2015–2019 was 3.2 per cent. The report finds policy discussions continuing to centre on inflation, conveying confidence that anticipated monetary easing will heal the world’s economic woes. Amidst these global woes, UNCTAD highlights that India grew 6.7 per cent in 2023 and it is expected to expand by 6.5 per cent in 2024.

The expansion in 2023 was driven by strong public investment outlays as well as the vitality of the services sector which benefitted from robust local demand for consumer services and firm external demand for the country’s business services exports. These factors are expected to continue to support growth in 2024. In the outlook, an increasing trend of multinationals extending their manufacturing processes into India in an effort to diversify their supply chains will also have a positive impact on Indian exports, while moderating commodity prices will be beneficial to the country’s import bill. The Reserve Bank of India is expected to keep interest rates constant in the near term, while restrained public consumption spending will be offset by strong public investment expenditures.

The prospect of interest rate cuts could improve the fiscal outlook for governments and businesses, but as UNCTAD notes, “the monetary policy alone cannot solve all pressing global challenges. Strategies to revive investment and trade, support full employment and fair income distribution are crucial to driving robust growth and meeting sustainable development goals”. In other Southern Asian countries, however, economic growth remains more subdued with three countries in the region – Bangladesh, Pakistan and Sri Lanka – currently under IMF programmes, the conditionalities of which necessitate the application of tight monetary policies and fiscal austerity measures whose impacts are most severely felt by low-income households.

Meanwhile, the pressing challenges of trade disruptions, climate change, low growth, underinvestment and inequalities are growing more serious. Even more concerning than its projected pace, is the fact that global growth appears to be strongly driven by private consumption which in 2024 is projected to grow about 4 per cent while total income is only projected to expand 2.6 per cent. In practice, patterns observed since the early 2000s indicate that periods of fast consumption growth tend to be financed by borrowing. Given that the savings accumulated during the pandemic (mainly by more affluent households) have now mostly returned to pre-2020 levels, debt is the likely source of funding for a large share of consumption. In Asia, the economy of China, its largest economy, expanded by 5.2 per cent in 2023.

For 2024, the Government set an official growth rate target of “around 5 per cent”, indicating its economic confidence and ambition. The economic data for January–February also showed positive signals, with the total value added of the manufacturing sector expanding 7.7 per cent year on year and the value of merchandise trade growing 8.7 per cent. Yet, the economy has been facing some headwinds, such as external uncertainties, troublesome housing market, underperforming labour market and subdued consumption. However, with the total government debt-to-GDP ratio standing at 55 per cent and inflation at 0.2 per cent at the end of 2023, fiscal and policy spaces allow for proactive fiscal policies and prudent monetary policy.

Geopolitical events, macroeconomic data, and quarterly earnings of corporates would guide the stock market in a holiday-shortened week ahead, analysts said. Stock markets will remain closed on Wednesday for Ram Navami.

“This week promises to be crucial for the market as fresh worries about a potential conflict between Iran and Israel emerge. Any significant escalation in tensions could trigger panic selling and volatility in global equity markets. The market will also be closely monitoring the movement of crude oil prices, which are often impacted by geopolitical events,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Investors will be watching for earnings reports from Infosys, Bajaj Auto, and Wipro later in the week, he said. On the macroeconomic front, China’s GDP data, US retail sales figures, and movements in the US bond yields and the dollar index will be important factors influencing market sentiment, Meena added.

Shares of TCS will remain in focus on Monday. The company reported its January-March quarterly earnings on Friday. The IT services major logged a 9 per cent growth in net profit at Rs 12,434 crore in the fourth quarter of FY24 due to strong domestic business even as the company struggled in its key markets overseas. In the entire fiscal year, the Tata Group company’s net profit surged 9 per cent to Rs 45,908 crore, while the revenue went up to Rs 2,40,893 crore from Rs 2,25,458 crore a year ago.

“The outlook for the market will be guided by the major global and domestic economic data, India’s WPI inflation data and WPI manufacturing data, China GDP growth rate, US manufacturing production and US initial jobless claims,” Arvinder Singh Nanda, Senior Vice President, Master Capital Services Ltd, said.

Retail inflation declined to a five-month low of 4.85 per cent in March mainly due to cooling food prices, inching towards the Reserve Bank’s target of 4 per cent, according to official data released on Friday. India’s industrial production growth accelerated to a four-month high of 5.7 per cent in February 2024 due to good performance of the mining sector, showed the government data released on Friday.

“Investors are closely monitoring Q4 earnings and geopolitical events, which are poised to shape market direction,” said Vinod Nair, Head of Research, Geojit Financial Services.

Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said, while the Indian economy is on a firm footing, the spate of negative news, especially from the global front, would at times halt the Indian equities’ upward march.

Stock markets were closed on Thursday on account of Eid-Ul-Fitr. Last week, the BSE benchmark Sensex dipped marginally by 3.32 points after a record-breaking rally. The benchmark had settled at an all-time high of 75,038.15 on Wednesday. It had reached the lifetime peak of 75,124.28 on Tuesday.

Foreign portfolio investors (FPIs) continued to remain net buyers for the third month in April in Indian stock markets. So far in the month, they bought stocks worth Rs 13,347 crore in India, National Securities Depository Limited (NSDL) data showed.

Foreign portfolio investment (FPI) involves an investor buying foreign financial assets. FPIs had aggressively sold Indian stocks and turned net sellers in the Indian equity market in January 2024, before turning net buyers thereafter.

“A major concern is the surcharged geopolitical situation in the Middle East with heightened tensions between Iran and Israel. These will keep the markets on tenderhooks in the near term,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, on the FPI outlook.

In March, they bought stocks worth Rs 35,098 crore. Firm GDP growth forecasts, inflation at manageable levels, political stability at the central government level, and signs that the central bank is done tightening its monetary policy have all contributed to painting a bright picture for the Indian economy.

India’s GDP grew at a massive 8.4 percent during the October–December quarter of the financial year 2023–24, and the country continued to remain the fastest-growing major economy. The foreign portfolio sold aggressively in January after making a beeline to accumulate domestic stocks during the prior two months—November and December.

In December, they accumulated stocks worth Rs 66,135 crore. In November, the FPI inflow was Rs 9,001 crore, NSDL data showed.

To put it into context, the entire year saw an inflow of about Rs 171,107 crore, and notably, over one-third of it came in December. The strong inflow of funds from foreign portfolio investors (FPIs) had then supported the benchmark stock indices to march towards all-time highs.

Before November, FPI participation in Indian stocks was lukewarm, and they had turned net sellers. They sold Rs 14,768 crore and Rs 24,548 crore in September and October, respectively.

Before that, FPIs bought Indian stocks worth Rs 7,936 crore, Rs 11,631 crore, Rs 43,838 crore, Rs 47,148 crore, Rs 46,618 crore, and Rs 12,262 crore in March, April, May, June, July, and August, respectively.